SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14 a-11(c) or ss. 240.14a-12
STORAGE USA, INC.
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
.................................................................
(2) Aggregate number of securities to which transaction applies:
.................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth the amount on which
the filing fee was calculated and state how it was determined):
.................................................................
(4) Proposed maximum aggregate value of transaction:
.................................................................
(5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................
(2) Form, Schedule or Registration Statement No.:
.......................................
(3) Filing Party:
.......................................
(4) Date Filed:
.........................................
<PAGE>
STORAGE USA LOGO
April 6, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Storage USA, Inc. (the "Company") to be held on May 6, 1998, at 10:00 a.m.
local time, at 165 Madison Avenue, Memphis, Tennessee 38103. The meeting will be
held in the auditorium on the lower-level. The business to be conducted at the
meeting is set forth in the formal notice that follows. There will also be a
report on the Company's business, and shareholders will have an opportunity to
ask questions.
The Company relies upon all shareholders to execute and return their
proxies in order to avoid costly proxy solicitation. Therefore, in order to save
your Company the unnecessary expense of further proxy solicitation, I ask that
you promptly sign and return the enclosed proxy card in the envelope provided.
If you attend the annual meeting, you may withdraw your proxy at the meeting and
vote your shares in person.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Dean Jernigan
Dean Jernigan
Chairman of the Board,
Chief Executive Officer and
President
<PAGE>
STORAGE USA, INC.
165 Madison Avenue
Suite 1300
Memphis, Tennessee 38103
(901) 252-2000
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 6, 1998
----------------------
NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders (the
"Annual Meeting") of Storage USA, Inc., a Tennessee corporation (the "Company"),
will be held on May 6, 1998, at 10:00 a.m. local time, at 165 Madison Avenue,
Memphis, Tennessee 38103, in the lower-level auditorium, for the following
purposes:
1. To elect nine directors (Proposal 1);
2. To approve an amendment to the Company's 1993 Omnibus Stock
Plan (Proposal 2);
3. To ratify the selection of the auditors for the fiscal year
ending December 31, 1998 (Proposal 3); and
4. To transact such other business as may properly come before
the meeting and any adjournments thereof.
Pursuant to the Amended and Restated Bylaws of the Company, the
Company's Board of Directors has fixed the close of business on April 2, 1998,
as the record date for the determination of shareholders of the Company entitled
to notice of and to vote at the Annual Meeting. Therefore, only record holders
of Company Common Stock at the close of business on that date are entitled to
notice of and to vote shares held on the record date at the Annual Meeting and
any adjournments thereof.
We urge you to review carefully the enclosed materials. Your vote is
important. All shareholders are urged to attend the meeting in person or by
proxy. If you receive more than one proxy card because your shares are
registered in different names or at different addresses, please indicate your
vote, sign, date and return each proxy card so that all of your shares will be
represented at the Annual Meeting.
By Order of the Board of Directors
Christopher P. Marr
Secretary
Memphis, Tennessee
April 6, 1998
IT IS IMPORTANT THAT ALL PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE INDICATE YOUR VOTE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY, IF YOU
WISH, REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED, INCLUDING BY
VOTING AT THE MEETING.
<PAGE>
STORAGE USA, INC.
165 Madison Avenue
Suite 1300
Memphis, Tennessee 38103
(901) 252-2000
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 6, 1998
----------------------
General
The enclosed proxy is solicited by the Board of Directors of Storage
USA, Inc. (the "Company") for the Annual Meeting of Shareholders to be held on
May 6, 1998, at 10:00 a.m. local time, 165 Madison Avenue, Memphis, Tennessee
38103. The meeting will be held in the auditorium on the lower-level (the
"Annual Meeting"). The proxy may be revoked at any time prior to voting thereof
by notifying the persons named therein of intention to revoke or by conduct
inconsistent with continued effectiveness of the proxy, such as delivery of a
later dated proxy or appearance at the meeting and voting in person the shares
to which the proxy relates. Shares represented by executed proxies will be
voted, unless a different specification is made therein, FOR election of nine
directors, FOR the proposed amendment to the Company's 1993 Omnibus Stock Plan,
and FOR the ratification of the selection of auditors for the fiscal year ending
December 31, 1998. If necessary, and unless the shares represented by the proxy
were voted against the applicable proposal therein, the proxy holder also may
vote in favor of a proposal to adjourn the Annual Meeting to permit further
solicitation of proxies in order to obtain sufficient votes to approve any of
the matters being considered at the Annual Meeting. The Company knows of no
business other than that set forth above to be transacted at the meeting or any
adjournment thereof, but if other matters requiring a vote do arise, it is the
intention of the persons named in the proxy to vote in accordance with their
judgment on such matters.
This proxy statement and the enclosed proxy were mailed on April 6,
1998 to shareholders of record at the close of business on April 2, 1998 (the
"Record Date"). The Company has mailed each shareholder of record as of the
Record Date an Annual Report that includes audited financial statements for the
period ended December 31, 1997.
At the close of business on the Record Date, the Company had 27,680,428
shares outstanding and entitled to vote. Each share has one vote on all matters
including those to be acted upon at the Annual Meeting. A majority of votes
entitled to be cast on matters to be considered at the meeting will constitute a
quorum. If a share is represented for any purpose at the meeting, it is deemed
to be present for all other matters. Abstentions and shares held of record by a
broker or its nominee ("Broker Shares") that are voted on any matter are
included in determining the number of votes present. Broker Shares that are not
voted on any matter at the meeting will not be included in determining whether a
quorum is present. If a quorum is present, the affirmative vote of a plurality
of the shares voting at the Annual Meeting is required to elect directors. The
affirmative vote of a majority of the outstanding shares entitled to vote
thereon is required for approval of the proposed amendment to the Company's 1993
Omnibus Stock Plan. The affirmative vote of a majority of the votes cast is
required to approve the ratification of the selection of auditors.
Shareholders who wish to abstain from voting on any matter to be voted
on at the Annual Meeting may do so by specifying that their vote on such matter
be withheld in the manner provided in the enclosed proxy. Abstentions with
respect to the proposal to approve the amendment to the Company's 1993 Omnibus
Stock Plan will be treated as shares present and entitled to vote on that
proposal. Consequently, abstentions will be equivalent to a negative vote on
that proposal. Abstentions will not be included in determining the number of
votes cast for selection of auditors.
Under New York Stock Exchange Rules, Broker Shares with respect to
which the broker has not received customer instructions as to voting on Proposal
2 will not be voted by the broker ("Broker Non-Votes"). Because Proposal 2
requires the affirmative vote of a majority of outstanding shares entitled to
vote, a Broker Non-Vote will be equivalent to a negative vote on that Proposal.
If your shares are held in the name of your broker, you must mark, execute and
return your proxy card to avoid a Broker Non-Vote with respect to your shares on
Proposal 2.
The Company will comply with instructions in a proxy executed
with respect to Broker Shares that less than all of such shares are to be voted
on a particular matter. The mailing address of the Company is 165 Madison
Avenue, Suite 1300, Memphis, Tennessee 38103. Notices of revocation of proxies
should be sent to that address.
1
<PAGE>
PROPOSAL TO ELECT NINE DIRECTORS
(Proposal 1)
Election of Directors
At the Annual Meeting, nine directors are to be elected, each to hold
office until the next Annual Meeting of Shareholders and until his or her
successor is duly elected and qualified, except in the event of death,
resignation or removal. Unless otherwise specified, proxies solicited hereby
will be voted FOR election of the nominees listed below, except that in the
event any of those named should not continue to be available for election,
discretionary authority may be exercised to vote for a substitute. No
circumstances are presently known that would render any nominee named herein
unavailable. All of the nominees are now members of the Board of Directors and,
except for Messrs. Blankenship and Graf, were elected at prior Annual Meetings
of Shareholders. Messrs. Blankenship and Graf were elected to fill the vacancies
in the Board created when Mr. Marshall Peck resigned from the Board and Mr.
Dennis A. Reeve resigned from the Board to accept a position as Chief Financial
Officer of the Company.
<TABLE>
<CAPTION>
Present Principal Occupation or
Name Age Employment and Five-Year Employment History
---- --- -------------------------------------------
<S> <C>
Dean Jernigan 52 Chairman of the Board and Director since 1985. Mr. Jernigan has been
the Chief Executive Officer of the Company since its inception in
1985.
John P. McCann(1)(2) 52 Director since March 23, 1994. Mr. McCann has, since 1978, been the
President, Chief Executive Officer and a Director of United Dominion
Realty Trust and Lawyers Title Corporation, Richmond, Virginia.
C. Ronald Blankenship(2) 47 Director since November 5, 1997. Chairman and Trustee of Pacific
Retail Trust and Managing Director of Security Capital Group since
March 1991. From June 1988 to March 1991, Mr. Blankenship was
Regional Partner, Trammell Crow Residential, Chicago, Illinois. Mr.
Blankenship is also a Director of Security Capital Atlantic and
Homestead Village.
William D. Sanders (3) 56 Director since November 6, 1996, Mr. Sanders has, since 1990, been
Chairman of the Board and Chief Executive Officer of Security Capital
Group. Mr. Sanders is also a Director of R. R. Donnelley & Sons
Company, Carr America Realty Corp. and Security Capital U.S. Realty.
Caroline S. McBride (4) 44 Director since May 7, 1997. Managing Director of Security Capital
Investment Research Incorporated since June 1996. From January 1995
to June 1996, Ms. McBride was the director of private market
investments for the IBM Retirement Fund and from January 1992 to
January 1995, she was also the director of real estate investments
for such fund. Prior to joining the IBM Retirement Fund in 1992, Ms.
McBride was director of finance, investments and asset management for
IBM's corporate real estate division. Ms. McBride is a Director of
CarrAmerica Realty Corp.
Harry J. Thie(1)(2)(4) 55 Director since March 23, 1994. Senior researcher with the RAND
Corporation, a non-profit research institute since 1991. Prior
thereto, from 1987 to 1991, he was Senior Manager in the Office of
the Assistant Secretary of the Army for Manpower and Reserve Affairs.
2
<PAGE>
<CAPTION>
Present Principal Occupation or
Name Age Employment and Five-Year Employment History
---- --- -------------------------------------------
Mark Jorgensen(1)(3) 57 Director since January 25, 1995. Mr. Jorgensen serves as a real estate
consultant to the pension fund industry. From 1992 until 1994, Mr.
Jorgensen was the managing director of the Prudential's PRISA, PRISA II
and PRISA III real estate portfolios, and prior thereto he was a Senior
Investment Officer - Real Estate for California State Teachers'
Retirement System.
Howard P. Colhoun(1)(3)(4) 62 Director since March 23, 1994. Mr. Colhoun has been General Partner
of Emerging Growth Partners, Baltimore, Maryland, a venture
capital/small public company investment partnership since 1982. Mr.
Colhoun is Trustee of Harbor Fund, a family of nine mutual funds.
Alan B. Graf, Jr.(1)(2)(4) 45 Director since August 6, 1997. Mr. Graf has been Executive Vice
President & Chief Financial Officer of FDX Corporation and its
predecessor Federal Express since 1996 and Senior Vice President &
Chief Financial Officer since 1991. Mr. Graf is a director of
Kimball International, Inc. and a member of the Dean's Advisory
Council at Indiana University School of Business.
- ------------------
</TABLE>
(1) Independent Director
(2) Member of the Compensation Committee
(3) Member of the Corporate Governance Committee
(4) Member of the Audit Committee
Regular meetings of the Board are held quarterly. The Board had one
additional special meeting during 1997. During 1997, the Audit, Compensation,
and Corporate Governance Committees each held 3 meetings. All of the directors
attended at least 75% of the aggregate number of meetings of the Board and
committees of the Board during the period in which they served in 1997.
Ms. McBride and Messrs. Blankenship and Sanders have been nominated for election
as directors by Security Capital U.S. Realty ("SC-USREALTY") pursuant to the
terms of the Strategic Alliance Agreement, dated March 19, 1996, among the
Company, SUSA Partnership, L.P., Security Capital Holdings S.A. and SC-USREALTY,
as amended. The Strategic Alliance Agreement generally provides that SC-REALTY
may nominate a number of directors proportionate to its ownership of the
Company's Common Stock, but not fewer than two, for so long as it owns at least
20% of the Company's Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1.
3
<PAGE>
Beneficial Ownership of Company Common Stock
The following table sets forth information regarding the beneficial
ownership of shares of Company Common Stock outstanding as of the Record Date,
by (i) each person or group known to the Company who owns more than 5% of the
outstanding shares of Company Common Stock, and (ii) each of the Directors, the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company. Unless otherwise indicated in the footnotes, all of
such interests are owned directly, and the indicated person or entity has sole
voting and investment power. The number of shares represents the number of
shares of Company Common Stock the person holds, including shares that may be
issued upon the exercise of options that are exercisable within 60 days of the
Record Date.
<TABLE>
<CAPTION>
Shares Percent of
Held Class
---- -----
<S> <C>
Security Capital U.S. Realty.................. 11,620,654 42.0%
Security Capital Holdings S.A.
69, route d'Esch
L-1470 Luxembourg
Dean Jernigan................................. 606,973(1) 2.2%
Morris Kriger................................. 65,206(2) (11)
Jesse Morgan.................................. 83,100(3) (11)
Douglas Chamberlain........................... 70,000(3) (11)
Karl Haas..................................... 53,400(4) (11)
Caroline S. McBride........................... 2,382(5) (11)
Howard P. Colhoun*............................ 7,649(6) (11)
John P. McCann*............................... 11,911(6) (11)
Harry J. Thie*................................ 9,727(6) (11)
Mark Jorgensen*............................... 11,024(7) (11)
William D. Sanders............................ 2,104(8) (11)
Alan B. Graf, Jr.*............................ 3,317(9) (11)
C. Ronald Blankenship......................... 1,202(9) (11)
All Directors and Executive Officers
as a Group (27 persons)....................... 1,205,627(10) 4.4%
165 Madison Avenue
Suite 1300
Memphis, Tennessee 38103
- -------------------------
</TABLE>
* Independent Director
(1) Includes 120,000 shares of Company Common Stock subject to immediately
exercisable options and 5,438 shares owned by Mr. Jernigan's children.
(2) Includes 46,000 shares of Company Common Stock subject to immediately
exercisable options.
(3) Includes 50,000 shares of Company Common Stock subject to immediately
exercisable options.
(4) Includes 40,000 shares of Company Common Stock subject to immediately
exercisable options.
(5) Includes 2,000 shares of Company Common Stock subject to immediately
exercisable options.
(6) Includes 4,318 shares of Company Common Stock subject to immediately
exercisable options.
(7) Includes 3,376 shares of Company Common Stock subject to immediately
exercisable options.
(8) Includes 1,722 shares of Company Common Stock subject to immediately
exercisable options.
(9) Includes 1,000 shares of Company Common Stock subject to immediately
exercisable options.
(10) Includes 423,447 shares of Company Common Stock subject to immediately
exercisable options.
(11) Less than 1%.
4
<PAGE>
The Strategic Alliance Agreement generally provides that SC-USREALTY is
required to vote its shares of Common Stock in accordance with the
recommendation of the Company's Board of Directors or proportionally in
accordance with the vote of the other holders of the Common Stock, except with
respect to the election of its nominees to the Company's Board (as to which
SC-USREALTY can vote its shares in its sole discretion) and with respect to any
amendment to the Company's Charter or Bylaws that would reasonably be expected
to materially adversely affect SC-USREALTY and certain extraordinary matters.
Consequently, SC-USREALTY must vote its shares at the annual meeting for the
Board of Directors' nominees (other than SC-USREALTY's representatives) or vote
proportionally for such nominees in accordance with the vote of the other
shareholders.
Committees of the Board of Directors
Audit Committee
The Audit Committee consists of four non-employee Directors. The Audit
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls. Messrs. Graf, Thie,
Colhoun, and Ms. McBride current serve on the Audit Committee with Mr. Graf
serving as Chairman.
Compensation Committee
The Compensation Committee consists of three non-employee Directors.
The Compensation Committee determines compensation for the Company's Chief
Executive Officer and President, reviews and approves the compensation of the
other executive officers and administers the 1993 Omnibus Stock Plan and 1995
Employee Stock Purchase and Loan Plan. Messrs. Thie, Graf, McCaan and
Blankenship currently serve on the Compensation Committee, with Mr. Thie
serving as Chairman.
Governance Committee
In December 1996, the Board of Directors created a Governance committee
comprised of Messrs. Jorgensen, Colhoun and Sanders, with Mr. Jorgensen serving
as Chairman. The committee evaluates the Company's corporate governance policies
and procedures and monitors related matters of current concern to investors and
the Board of Directors.
Compensation of Directors
The Company pays each non-employee Director an annual fee of $14,000,
paid in Company Common Stock under the 1993 Omnibus Stock Plan, plus $1,000 cash
per Board meeting attended, $750 cash per committee meeting attended, and $350
cash for teleconference meetings attended. Directors who are employees of the
Company are not paid any directors' fees, either in stock or in cash. In
addition, the Company reimburses directors for expenses incurred in connection
with their activities on behalf of the Company.
Each non-employee Director of the Company, who is serving on the date
of the last regularly scheduled quarterly meeting, receives a grant of options
under the Omnibus Stock Plan to purchase 1,000 shares of Company Common Stock at
a price equal to fair market value per share on the date of such meeting.
5
<PAGE>
Executive Compensation
The following table sets forth information concerning the annual
compensation for services in all capacities to the Company and its subsidiaries
for the period from March 16, 1994, the date the Company became subject to the
Securities Exchange Act of 1934, as amended, through December 31, 1997, of those
persons who were, at December 31, 1997, (i) the Chief Executive Officer and (ii)
the four other most highly compensated executive officers of the Company
(hereinafter, the "Named Officers") whose annual salary exceeds $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------ ------------
Awards
Other ------
Annual Securities
Compen- Underlying All Other(2)
Name and Principal Position Year Salary(1) Bonus sation Options(#) Compensation
- --------------------------- ---- --------- ----- ------ ---------- -------------
<S> <C>
Dean Jernigan 1997 $328,681 $197,209 $ - 75,000 $11,476
Chairman of the Board and 1996 279,231 174,519 - - 15,084
Chief Executive Officer 1995 218,539 97,875 - - 10,204
Karl Haas 1997 162,187 64,875 - 25,000 5,738
Executive Vice President, 1996 149,841 59,936 - 15,000 7,483
Management 1995 124,898 37,616 - - 4,934
Morris Kriger 1997 181,803 72,721 - 20,000 6,231
Executive Vice President, 1996 159,202 63,681 - 55,000 3,711
Acquisitions
Jesse Morgan 1997 156,686 62,674 - - 5,135
Executive Vice President, 1996 136,895 54,758 - 55,000 2,519
Development
Douglas Chamberlain 1997 138,050 55,220 - 15,000 5,184
Executive Vice President, 1996 133,013 53,205 - 7,500 7,078
Construction 1995 116,727 35,616 - - 4,674
- ----------------------
</TABLE>
(1) Messrs. Kriger and Morgan were employed by the Company commencing February
19, 1996.
(2) Represents contributions to the Company's 401k plan for each of the Named
Officers.
6
<PAGE>
Stock Options
The following table provides information concerning the grants of
options during 1997 under the 1993 Omnibus Stock Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value At
Percent of Assumed Annual Rates of Stock
Number of Total Options/ Price Appreciation for Option
Securities SARs Granted Term
Underlying to Employees Exercise of
Option/SARs In Fiscal Base Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ------------ ------------- ---------- ------ -------
<S> <C>
Dean Jernigan 75,000 9.8% $38.875 12/12/2007 $1,833,621 $4,646,755
Karl Haas 25,000 3.3% 38.875 12/12/2007 611,207 1,548,918
Morris Kriger 20,000 2.6% 38.875 12/12/2007 488,965 1,239,135
Jesse Morgan - - - - - -
Douglas Chamberlain 15,000 2.0% 38.875 12/12/2007 366,724 929,351
The following table provides information on the value of each Named
Officer's unexercised options at December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Unexercised Value of
Shares Acquired Options at Year End(#) Options at Year-End($)(1)
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- ----------------- ----------- ------------- ----------- -------------
Dean Jernigan - - 120,000 75,000 $2,182,500 $79,687
Karl Haas 10,000 $183,750 40,000 40,000 607,500 74,375
Morris Kriger - - 50,000 25,000 434,375 37,188
Jesse Morgan - - 50,000 5,000 434,375 15,938
Douglas Chamberlain - - 50,000 22,500 789,375 39,844
</TABLE>
(1) Based upon the closing price of the Company Common Stock on the NYSE on
December 31, 1997, of $39.9375 per share.
Certain Transactions
During 1997, $40,011 was paid to Memphis Jet, a company controlled by
Mr. Jernigan's wife. The payments represented the reimbursements of Memphis
Jet's actual costs incurred for the Company's use of an airplane owned by
Memphis Jet. The Board reviews and approves the amounts reimbursed.
7
<PAGE>
The executive officers of the Company listed in the table below are
indebted to the Company for loans to purchase Company Common Stock pursuant to
the 1995 Employee Stock Purchase and Loan Plan (the "Stock Purchase and Loan
Plan") approved by the shareholders at the 1994 Annual Meeting. The table
indicates the largest amount of the indebtedness outstanding since the beginning
of fiscal year 1997 and the amount outstanding at December 31, 1997. As provided
in the Stock Purchase and Loan Plan, such indebtedness bears interest at rates
ranging from 6.2% to 7.0% per annum and is collateralized by the Company Common
Stock purchased with the proceeds of such loan.
Maximum Indebtedness Indebtedness at
Name Since January 1, 1997 December 31, 1997
---- --------------------- -----------------
Dean Jernigan $4,754,377 $4,742,654
Karl Haas 290,438 286,515
Morris Kriger 621,594 616,976
Jesse Morgan 629,497 627,908
Douglas Chamberlain 580,876 573,332
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the Company's directors
and executive officers, and persons that own more than 10% of the Company Common
Stock, file with the Securities and Exchange Commission initial reports of
ownership and reports of change in ownership of Company Common Stock and other
equity securities of the Company. Copies of these reports must be filed with the
Company. Based solely on its review of the copies of these reports filed with
it, and written representations that no other reports were required, to the
Company's knowledge, all reports required by Section 16(a) were timely filed in
1997, except a Form 4 and the Form 5 for Mr. Haas.
8
<PAGE>
Report of the Compensation Committee on Executive Compensation
To Our Shareholders:
The Board has delegated to the Compensation Committee responsibility
for developing and administering programs for compensating the Company's
executive officers. The Compensation Committee, which consisted of three
non-employee Directors during 1997, believes that the Company's success is
attributable in part to the management and leadership efforts of its executive
officers. The Company's management team has substantial experience in owning,
operating, managing, constructing, developing and acquiring self-storage
facilities. The Company intends to maintain compensation policies, plans, and
programs which will attract and retain executives who can enhance shareholder
value.
The Compensation Committee determines the compensation for the Chief
Executive Officer and reviews and approves the Chief Executive Officer's
recommendation of the compensation for other executive officers.
In evaluating the performance and setting the compensation of the Chief
Executive, the Compensation Committee has considered industry compensation
levels and the success of the Company in executing and exceeding the
expectations of its business plan. The Compensation Committee engaged a
compensation consulting firm to review the salary and incentive paid for similar
positions in the real estate investment trust industry, and for a peer group of
companies, as a means of establishing reasonable levels of base and performance
compensation. Based on this review, the Compensation Committee established
levels of aggregate compensation that it judged to be approximately equal to the
median in the industry. Base compensation was determined primarily with
reference to industry data. Performance compensation in the form of bonuses was
granted for exceeding the business plan, particularly the 10.3% growth in funds
from operations per share, but also the success of the offerings of Company
Common Stock and debt securities of the Partnership, and the acquisition and
integration of 119 properties during the year.
Incentive compensation in the form of participation in the Stock
Purchase Plan also was granted. The Company's incentive compensation program is
designed to attract, motivate and retain executives critical to the long-term
success of the Company by promoting the alignment of executive interests and the
interests of shareholders. The Compensation Committee intends to use grants of
options under the 1993 Omnibus Stock Plan and participation in the Stock
Purchase Plan to create long-term incentives by providing the means for
executive officers to make a significant personal investment in the Company,
thus aligning their interests more closely with the interests of the
shareholders.
The size of the performance and incentive awards was determined based
on each recipient's position with the Company and, to a lesser extent, the
Compensation Committee's subjective judgment as to the recipient's contribution
to the success of the Company. The Chief Executive Officer used the same
criteria in establishing recommended base compensation, performance compensation
and incentive compensation for the other executive officers. The Compensation
Committee reviewed the recommended compensation for such officers, made some
modifications after discussion with the Chief Executive Officer and approved the
final compensation package.
Effective January 1, 1994, new Section 162(m) of the Internal Revenue
Code placed limits on the deductibility of certain compensation paid to
executive officers of the Company. The Compensation Committee does not
anticipate that these limitations will affect the Company in fiscal 1998, but
will continue to monitor their application and consider appropriate action.
COMPENSATION COMMITTEE
Harry J. Thie, Chairman
John P. McCann
C. Ronald Blankenship
Alan B. Graf, Jr.
9
<PAGE>
Shareholder Return
The following line graph sets forth a comparison of the percentage
change in the cumulative total shareholder return on the Company's Common Stock
compared to the cumulative total return of the S&P Stock Index and the National
Association of Real Estate Investment Trusts ("NAREIT") Equity REIT Total Return
Index for the period March 16, 1994, the date on which trading of the Company's
Common Stock commenced, through December 31, 1997.
The graph assumes that the shares of the Company Common Stock were
bought at the Initial Public Offering price of $21.75 per share and that the
value of the investment in each of the Company Common Stock and the indices was
$100 at the beginning of the period. The graph further assumes the reinvestment
of dividends. [The NAREIT Equity REIT Total Return Index, which is only
published monthly based on the last closing prices of the preceding month, and
the S&P Stock Index have been prorated for the month of March to arrive at the
beginning index used in this graph.]
The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
Performance Graph
Comparison of Cumulative Total Return Among
Storage USA, Inc.
The NAREIT Equity REIT Total Return
Index and the S&P 500 Index
3/16/94 12/31/94 12/31/95 12/31/96 12/31/97
------- -------- -------- -------- --------
Storage USA 100.00 133.15 168.09 205.15 229.20
S&P 500 100.00 105.33 144.75 177.98 237.39
NAREIT Equity 100.00 99.77 115.01 155.56 187.08
10
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S 1993 OMNIBUS STOCK PLAN
(Proposal 2)
The Board of Directors unanimously has approved and recommends amending
the Company's 1993 Omnibus Stock Plan (the "Omnibus Stock Plan") to increase the
number of shares of Common Stock issuable under the Omnibus Stock Plan from
2,000,000 to 4,000,000. The Company has adopted the Omnibus Stock Plan to
attract and provide incentives to officers, key employees and Independent
Directors.
Shares Subject to Option; Administration
The Omnibus Stock Plan, administered by the Compensation Committee,
provides for the grant of options to purchase a specified number of Shares
("Options") or grants of shares of Common Stock that are "restricted" for
purposes of section 83 of the Internal Revenue Code ("Section 83 Shares"). Under
the Omnibus Stock Plan as proposed to be amended, a total of 4,000,000 shares of
Common Stock will be available for grant, an increase of 2,000,000 shares.
Shares subject to Options that expire unexercised and Section 83 Share grants
that are forfeited will be available for new award grants. In the event of a
stock dividend or distribution, recapitalization, merger, consolidation,
reorganization, split-up, combination, exchange of shares or the like, the Board
of Directors, in its discretion, may make such adjustments in the aggregate
number and kind of shares reserved for issuance, the number and kind of shares
covered by outstanding awards and the exercise prices specified therein as may
be determined to be appropriate. As of March 31, 1998, 1,507,064 options for
shares of Common Stock have been granted to officers, directors and employees of
the Company as NQSOs (as defined below) under the Omnibus Stock Plan. Based on
the closing sale price of the Company's Common Stock on the New York Stock
Exchange on that date of $38.375, the 1,507,064 shares of Common Stock that
would be issuable under the amended Omnibus Stock Plan would have had a market
value of $57,833,581.
Eligibility
Officers, employees and directors of the Company, its subsidiaries or
designated affiliates (including SUSA Partnership, L.P., the operating
partnership of which the Company is general partner (the "Operating
Partnership")) are eligible to participate in the Omnibus Stock Plan, but
directors who are not also employees may participate only pursuant to automatic
grants of Options and Shares under specified formulas. See "Compensation of
Directors," above.
Plan Benefits
The Options can either be "incentive stock options" that are intended
to satisfy the requirements of the Code ("ISOs") or "non-qualified stock
options" that are not intended to satisfy such requirements ("NQSOs"); provided,
however, that employees of the Operating Partnership and directors who are not
also employees of the Company will be eligible only for the grant of NQSOs. The
Compensation Committee has the discretion to fix the exercise price of the
Options; however, the exercise price for ISOs cannot be less than 100% of fair
market value as of the date of grant. The Option exercise price may be satisfied
in cash or by exchanging shares of Common Stock owned by the optionee, or a
combination of cash and shares. The Company may facilitate the cashless exercise
of Options through customary brokerage arrangements. If the exercise price is
paid by tendering shares, the Committee in its discretion may grant the optionee
a new stock option for the number of shares used to pay the exercise price.
Subject to the terms of the Omnibus Stock Plan, the Compensation Committee has
broad discretion as to the terms and conditions upon which Options granted shall
be exercised. Options have a maximum term of ten years from date of grant. The
right of any participant to exercise an Option may not be transferred in any way
other than by will or the laws of descent and distribution.
The Omnibus Stock Plan also permits the Compensation Committee to grant
Section 83 Shares to a participant subject to the terms and conditions imposed
by the Compensation Committee. These terms will include a restriction period
during which the Section 83 Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered and during which such shares are subject to
forfeiture if one or more conditions established by the Compensation Committee
are not satisfied. Except for such restrictions on transfer and such other
restrictions as the Compensation Committee may impose, the participant will have
all the rights of a holder of Common Stock as to such Section 83 Shares
including the right to vote the shares and the right to receive any cash
distributions. The Compensation Committee has broad discretion as to the
specific terms and conditions of each award, including applicable rights upon
certain terminations of employment.
The Compensation Committee, in its sole discretion to further the
purpose of the Omnibus Stock Plan, may provide for supplemental cash payments or
loans to individuals in connection with all or any part of an award under the
11
<PAGE>
Omnibus Stock Plan, provided that in no event shall the amount of any such
payment exceed: (i) in the case of an option, the excess of the fair market
value of a share on the date of exercise over the option price multiplied by the
number of shares for which such an option is exercised, or (ii) in the case of a
restricted stock award, the value of the shares and other consideration issued
in payment of such award. The Compensation Committee also has the discretion to
permit a participant to satisfy such tax withholding obligations, in whole or in
part, by having the Company withhold shares for the value equal to the amount of
taxes required by law to be withheld.
Change in Control
If a Change in Control occurs, Options granted that were not previously
exercisable and vested will become fully exercisable and vested and all
restrictions applicable to any Section 83 Shares will lapse. In general, a
Change in Control means (i) the acquisition of the power to direct, or cause the
direction of, the management and policies of the Company by a person (not with
others, whether through the ownership of Common Stock, by contract or
otherwise), or (ii) the acquisition, directly or indirectly, of the power to
vote more than 20% of the outstanding Common Stock by any person or by two or
more persons acting together except an acquisition from the Company or by the
Company, the Company's management or a Company-sponsored employee benefit plan,
where (x) the term "person" means a natural person, corporation, partnership,
joint venture, trust, government or instrumentality of a government, and (y)
customary agreements with or between underwriters and selling group members with
respect to a bona fide public offering of Common Stock shall be disregarded for
purposes of this definition.
Non-Competition
Unless the award agreement with respect to any Options or Section 83
Shares provides otherwise, a participant will forfeit all unexercised, unearned
and unpaid awards, including awards earned but not yet paid, all unpaid
dividends and dividend equivalents, and all accrued interest, if (i) in the
opinion of the Compensation Committee, the participant, without the written
consent of the Compensation Committee, engages directly or indirectly in any
manner or capacity as principal, agent, partner, officer, director, employee or
otherwise, in a business or activity competitive with the business conducted by
the Company or any of its subsidiaries; or (ii) the participant performs any act
or engages in any activity that, in the opinion of the Chief Executive Officer
of the Company, is inimical to the best interests of the Company.
Amendment of Omnibus Stock Plan
The Board of Directors may terminate, amend, modify or suspend the
Omnibus Stock Plan at any time, except that the Board of Directors may not,
without the authorization of the holders of a majority of the Company's
outstanding Common Stock, increase the maximum number of shares that may be
issued under the Omnibus Stock Plan (other than the adjustments pursuant to the
Omnibus Stock Plan), extend the last date on which awards may be granted under
the Omnibus Stock Plan, extend the date on which the Omnibus Stock Plan expires,
change the class of persons eligible to receive awards or change the minimum
option price. However, no termination, modification, amendment or suspension of
the Omnibus Stock Plan may impair the rights of any participant under an award
previously granted without the written consent of such participant.
Duration of Omnibus Stock Plan
Unless it is sooner terminated in accordance with its terms, the
Omnibus Stock Plan will remain in effect until all awards thereunder have been
satisfied or otherwise terminated, but no award will be granted after December
28, 2003.
Federal Income Tax Consequences
The Company has been advised by counsel regarding the federal income
tax consequences of the Omnibus Stock Plan. No income will be recognized by a
participant at the time an option is granted. If the Option is an ISO, no income
will be recognized upon the participant's exercise of the Option (although the
exercise of an ISO may result in, or increase, an employee's alternative minimum
tax). Income will be recognized by an employee when he disposes of shares
acquired under an ISO. The exercise of a NQSO generally will be a taxable event
that will require the participant to recognize, as ordinary income, the
difference between the shares' fair market value and the option price.
Income will be recognized on account of an award of Restricted Shares
when the shares first become transferable or are no longer subject to a
substantial risk of forfeiture. At that time, the participant will recognize
12
<PAGE>
income equal to the fair market value of the Restricted Shares. Notwithstanding
the general rule, a participant may elect to recognize income, equal to the fair
market value of the Restricted Shares, as of the date of award.
The employer (either the Company or a subsidiary) will be entitled to
claim a federal income tax deduction on account of the exercise of a NQSO or the
vesting of a Restricted Share award. The amount of the deduction will be equal
to the ordinary income recognized by the participant. The employer will not be
entitled to a federal income tax deduction on account of the grant or the
exercise of an ISO, except that the employer may claim a federal income tax
deduction on account of certain dispositions of ISO stock.
Income in the amount of such payments will be recognized upon receipt
by a participant of any supplemental cash payments made under the Omnibus Stock
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal 3)
The Company has engaged Coopers & Lybrand L.L.P. as its independent
public accountants since September 1993. The Board has selected Coopers &
Lybrand L.L.P. as auditors for the fiscal year ended December 31, 1998.
Representatives of Coopers & Lybrand L.L.P. will be present at the meeting to
respond to appropriate questions and to make such statements as they may desire.
The Board unanimously recommends a vote FOR the proposal to ratify the
selection of Coopers & Lybrand L.L.P. as the Company's independent public
accountants for the fiscal year ended December 31, 1998.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
SHAREHOLDER PROPOSALS
Any qualified shareholder willing to make a proposal to be acted upon
at the Annual Meeting of Shareholders in 1999 must submit such proposal to be
considered by the Company for inclusion in the proxy statement, to the Secretary
of the Company at its principal office in Memphis, Tennessee, no later than
January 6, 1999.
13
<PAGE>
STORAGE USA, INC.
Memphis, Tennessee 38103
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING MAY 6, 1998 CUSIP 861907
The undersigned hereby appoints Dean Jernigan and Christopher P. Marr and
each of their proxies (and if the undersigned is a proxy, as substitute
proxies) each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Common
Stock of the Company held of record by the undersigned on April 2, 1998, at the
annual meeting of shareholders to be held at 10:00 a.m. on May 6, 1998, or any
adjournment thereof.
The Board of Directors unanimously recommends a vote "FOR" each of the
following proposals
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees listed
C. Ronald Blankenship, Howard P. Calhoun, Alan B. Graf, Jr., Dean Jernigan,
Mark Jorgensen, Caroline S. McBride,
John P. McCann, William D. Sanders, Harry J. Thie
To withhold authority to vote for any individual nominee, write that name
on the line below.
------------------------------------------------------------------------------
2. To approve an amendment to Storage USA, Inc.'s 1993 Omnibus Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. To ratify the selection of the auditors for the fiscal year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AND
MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
Please sign exactly as your
name appears hereon. When
shares are held by joint
tenants, only one of such
persons need sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by the
president or other authorized
officer. If a partnership,
please sign in partnership name
by an authorized person. Please
mark, sign, date and return the
proxy card promptly, using the
enclosed envelope.
--------------------------------
Signature
Date ----------------------, 1998
